Company History:

Herzlia, Israel-based Scitex Corporation Ltd. is known worldwide as a leading developer, manufacturer, marketer, and servicer of interactive computerized prepress systems primarily for the graphic design, printing, and publishing markets. The company is a pioneer of Israeli high-tech, and a prototype for other Israeli electronics firms.

Scitex's graphic arts group, the largest component of Scitex and a major supplier of electronic prepress and short-run digital printing systems, specializes in digital cameras and scanners, color workstations for page assembly and retouching, client-server systems, professional inkjet color printers, and imagesetters and platesetters.

The company's Scitex America Corp. subsidiary, headquartered in Bedford, Massachusetts, manufactures products in its Response line for page make-up, designed for specific operations, and modular, for custom configuration.

The company started out developing pioneering technology for high-quality color prepress equipment used by newspapers and magazines throughout the world, but Scitex also produces output devices, including the Raystar flatbed laser plotter, introduced in 1985; the Eray laser plotter; and the ELP electronic laser plotter.

Other Scitex systems serve applications in mapmaking, interpretation of seismic data, and the design and preparation of printed circuit boards.

From Start to Trouble and Back Again, 1979-92

Scitex was founded in 1968. Arie Rosenfeld joined the company at that time, established Scitex's European subsidiary headquarters in Brussels in 1974, and went on to become COO (1987) and CEO (1988).

Scitex stunned the printing industry in 1979 by introducing the minicomputer-based turnkey Response 300 color prepress system, instantly outselling its two main competitors, Hell Graphic Systems and Crosfield Composition Systems Inc. (first to bring out automated input/output devices for color digital prepress systems), filling an enormous need, and serving a labor-intensive, costly niche--gathering graphic elements, correcting color separations, then preparing photographic film of the resulting page to be run on a press. The company's sales increased and technology improved every year for the next eight and, by 1984, sales reached $104 million.

In 1983, Scitex entered the printed circuit board (PCB) manufacturing industry with its Insight system, hoping to cash in on the computer market. But management was disappointed--expecting 1985 sales of nearly $18 million--when the computer industry sagged and manufacture of PCBs concurrently dropped. When the industry recovered several years later, PCBs were being designed by CAD/CAM systems, which designed entire engineering structures on a computer screen, technology Scitex did not have. In addition, while the market for prepress equipment in the U.S.--Scitex's core business--was far from exhausted, profits sagged from high product costs (Scitex's top-of-the-line Response system carried a pricetag of $1.5 million, out of reach for all but the largest publishing houses). Scitex did introduce a scaled-down Response system for $300,000, opening up the market for smaller graphics shops and publishing houses.

In 1985, Scitex America created HANDSHAKE, a proprietary program which was the first in the industry to establish standards for data transfer and multivendor system integration in page makeup and design layout. HANDSHAKE was a standardized software package allowing a wide variety of devices to pass information to, or receive information from, a Scitex Response color electronic prepress system. That same year, Crosfield, D.S. America, Eikonix, Hell, Scitex, and 3M met to establish a set of Digital Data Exchange Standards for the data imaging industry so varied systems would be compatible.

In September, Efraim Arazi, Scitex's founder, president, and CEO, passed the mantle to executive vice-president Arthur Low. By October, Scitex was leading the $3 billion computerized printing industry, with such clients as Time, Newsweek, the Chicago Tribune, and U.S. News & World Report.

A year later, in August 1986, Scitex America entered a joint venture with Contex Graphics Systems Inc. and Continental Can Company Inc. to market a packaging design system allowing designers to create three-dimensional packaging and label designs without preparing mock-ups or prototypes for each design.

By April 1987, Scitex America, with the Response system, was among the four top manufacturers of such equipment, with Crosfield (Studio), D.S. America (Sigmagraph), and Hell (Chromacom). Royal Zenith Company's scanner division and 3M were minor competitors.

Also that year, N.V. Phillips and DuPont Optical undertook to market and install optical disk storage--a 12-tape lookalike, write-once, optical disk, featuring two gigabytes (GB) in single-drive or jukebox (16-20 disk) format--on pagination systems, replacing magnetic tape storage. The four major companies in the industry began working with Phillips and DuPont on the project.

In 1988, Scitex America began working with Sports Illustrated as a technology provider. That March, Quark Technologies Inc., which made high-end Macintosh desktop-publishing software, announced an alliance with Scitex, allowing users of QuarkXPress 2.0 to generate compound documents containing text, color graphics, and photographs.

In July, Scitex America released a full-color, PC-based page design/layout system for direct access to electronic prepress operations called Visionary, combining concept-to-proof design functionality linked directly to a Response system for final production work. Visionary consisted of a Mac II platform, Sharp color scanner, Mitsubishi color thermal proofing printer, and Scitex's software/hardware interfacing package, Gateway, utilizing HandshakeXPress, providing users with an interface enabling their design workstations to communicate with and transfer text, graphics, and page geometry to a Scitex system.

By early 1989, the system had caught on in the magazine publishing industry, with many design departments, including those at Victoria and Modern Bride, using the system, getting linked by high-speed modems to Scitex prepress systems at service bureaus. Visionary allowed multiple four-color images on a page to be resized, moved, rotated, color corrected, or airbrushed in minutes, sometimes seconds, working with low-resolution scanned images of actual artwork, with flow-around type. Proofs could be pulled at the designer's workstation, with low-resolution color reasonably representative of the finished four-color pages.

By this time, though, Scitex was hurting financially, posting net losses for three years averaging $17.2 million annually. Scitex wrestled with transitioning its main product line from programs run on proprietary Hewlett-Packard based minicomputers to proprietary Intel chip-based workstations, while simultaneously selling off side businesses to finance the changeover. At the time, Israel's inflation rate was over 100 percent.

However, after the industry crises of the mid-1980s, Scitex continued introducing workstations, laser plotters, and powerful software as its competitors struggled under new corporate parents. Crosfield, formerly owned by DeLaRue, a Swiss holding company, chafed under joint ownership by DuPont and Fuji in 1989, and Hell floundered under the management of Linotype after being sold by Siemens in 1990. By February 1992, Scitex held 45 percent of the worldwide color prepress market and, within the printing industry, had become as recognized as Xerox Corporation.

Interesting Side Notes, 1991

Two instances of unusual and unexpected publicity arrived at Scitex's doorstep in 1991. The first occurred amidst the Gulf War, when schools shut down throughout Israel. Although a Scud missile landed 1,000 yards from company headquarters, Scitex continued business as usual, and hired 150 teachers to set up makeshift classrooms in a sealed bomb shelter on corporate grounds so parents could still come to work. The second surfaced near the end of the year, in November, when British tycoon Robert Maxwell died mysteriously at sea. His holdings in Scitex were considerable, amounting to some 27 percent of the company stock.

Acquisitions and Growth, 1991-Date

In April 1991, Scitex signed a 10-year agreement with Quark to develop custom extensions to QuarkXPress software under the Visionary page design/layout system. In October, Scitex and Optrotech agreed to cooperate on computerized retouching for the printing industry.

In March 1992, Scitex bought Leaf Systems, a highly regarded American manufacturer of desktop and portable scanners, filmless cameras, and preprint systems, for $35 million.

That June, International Paper, the largest paper product company in the world, acquired 11 percent of Scitex for $209 million; Scitex acquired RICOH Corporation's Telepress TP15 and TP25 product lines of compression and communication technologies, used to link prepress with remote proofing, plotting, and printing devices via satellite; and Scitex's research and development staff received the Rothschild Prize for excellence in the field of advanced technology.

In January 1993, Scitex, with Britain's DSP Group Ltd. (a major supplier of Application-Specific Digital Signal Processing chipset solutions to original equipment manufacturers (OEMs) for speech processing, speech-and-data compression, noise suppression, and image processing), formed a joint venture company--Nogatech Inc.&mdashø develop, market, and sell chipsets and electronic components for a number of applications, including enhanced CD video and audio recordings, and digital cameras and camcorders for capturing visual images.

The business climate for publishing industry technology suppliers slumped, and Scitex, Apple Computer Inc., and International Business Machines Corp. suffered falling stock prices and huge losses ($8.04 billion for IBM in one quarter). But Scitex bounced back. In June, Eastman Kodak's Dayton, Ohio-based inkjet operations was acquired for approximately $70 million, following Scitex's general strategy to meet multiple applications, and achieving direct-to-paper color digital printing. Scitex also allied itself with RasterOps Corporation (merged with Truevision in 1992, creating an industry leader in the development of color transformation, calibration technology, and Postscript raster image processors for printers and imagesetters), investing $10 million in the high-quality monitor maker for 13 percent of the stock, and giving Scitex entry into the video world.

In July, three major shareholders (Clal Electronic Industries Ltd., Discount Investment Corporation Ltd., and P.E.C. Israel Economic Corporation) bought $15 million worth of Scitex shares. In August, the Scitex Graphic Arts Users Association--the largest graphic arts users group in the industry--celebrated its 25th anniversary. At the conference, Scitex America exhibited new products, including four scanners, two workstations, connectivity programs, communication and network innovations, direct-to-plate and press development projects, an advanced workstation for packaging professionals, Dolev imagesetters, management tracking and production files, and screening technology called Scitex Class Screening. Scitex also continued development in PostScript and began exploring video post-production products, picture databases, and pushing digital signal processing technology for voice recognition. Additionally, an agreement was signed with Kodak and three other prepress vendors (competitors Dainippon Screen Manufacturing Ltd., Linotype-Hell Ltd., and Crosfield) to work with a Kodak PrintPhoto CD product, allowing the input capabilities provided by Photo CD and ProPhoto CD Master discs, as well as scanned input to be stored in prepress systems. In October, Scitex developed a device turning Xerox photocopiers into color laser printers, entering competition with E.F.I. Electronics For Imaging.

In May 1994, Scitex America introduced two new Mac-based scanners--the Smart 340L, to scan reflective art and transparencies (color and black-and-white) directly into the computer; and the Smart 730PS, to scan and edit multiple images simultaneously--and ResoLUT PS, a NuBus card, to convert YCC and RGB file formats into CMYK, and perform color correction and transformation on the Mac.

In its pursuit of prepress systems, Scitex in September purchased Iris Graphics Inc., a leading manufacturer of equipment for the digital printing industry that made the first direct digital color-proofing continuous-tone system, for $24 million. Also that month, Scitex entered the broadcast market, acquiring ImMIX from Carlton Communications PLC for $21 million, including ImMIX's VideoCube digital video editing system used by studios and independent producers. ImMIX, established by Carlton in 1990, began selling its editing systems in July 1993, reaching $19 million in sales the first year. Scitex also allied with International Paper, and sold its 50 percent of Nogatech to DSP Group Ltd. The following month, Scitex introduced the Savanna color workstation for large magazine publishers.

In December, Scitex America and Leaf introduced the Leaf CatchLight, a charge-coupled device (CCD) camera at the VISCOMM '94 conference. The single-exposure digital camera had the highest-quality photographs of moving subjects at the time, applying microscopic filters to the pixels on the CCD to capture color photographs, and could postprocess images as RGB files on the PowerMac 8100.

By 1995, with widespread acceptance of personal computers and the advent of desktop publishing, Scitex workstations--selling for $1.5 million each and making up nearly 70 percent of the company's income--became too expensive for most publishers and Scitex's earnings plummeted nearly 85 percent. The company boosted its digital printing division, selling machines which printed up to 6,000 black-and-white pages a minute, and its digital video business, with equipment that converted video and film footage so it could be edited on a computer.

Also in 1995, Kobi Bendel approached Scitex in a last-ditch effort to create a virtual advertising technology company which would place computer-generated corporate logos on playing surfaces, such as the center court of Wimbledon, visible only to television audiences. By June 1997, when Scitex announced the creation of SciDel Technologies Ltd., the venture was a $10 million company with offices in three countries. The technology premiered commercially in August 1996 at the Toshiba Tennis Classic in San Diego.

That September, the company acquired Abekas Video Systems from Carlton for $52 million, integrating the major digital video production equipment manufacturer (of special effects devices, digital disc recorders, switchers, and character generators) with ImMIX to create the Scitex Digital Video Division, giving the company a broader reach in the digital video market.

In November, Scitex expanded its repertoire with packaged software for diverse applications, including database management; created Scitex America Publishing, a division devoted to the publishing industry; and acquired 100 percent of P.Ink Press, a software publisher developing applications for structured query language databases, which Scitex had purchased 25 percent of and controlled since 1987. The P.Ink Publishing System brought competition from Quark, Atex Publishing Systems' Press2Go, and North Atlantic Publishing Systems Inc.'s Workflow Administrator. But in 1995, the company suffered net losses of $34.5 million on total revenue of $730.3 million. In early 1996, Scitex extended its strategic OEM program with Xerox.

In 1990, newspapers were produced on-demand via fax machines, but were gray, curly editions with limited success. Six years later, in March 1996, at The Newspaper Association of America's inaugural Operations SuperConference, Scitex's PressPoint system was released, using satellite transmission technology to make remote, multicolor printing on tabloid-plus page size and full-color printing on sturdy, white stock paper possible to deliver newspapers on-demand.

In April, American-Israeli businessman Davidi Gilo attempted a hostile takeover, but the four largest Scitex shareholders--Clal, Discount, P.E.C., and International Paper--purchased $7 million worth of shares. A month later, Rosenfeld left and was replaced by Yoav Chelouche. In July, Patrick Kareiva became president and CEO of Scitex America.

During the 1996 Summer Olympic Games in Atlanta, Scitex America provided Sports Illustrated with nearly $1 million in high-end imaging equipment to help the magazine produce more than 250,000 copies per day of the SI Olympic Daily. Scitex built an entire imaging department in the Olympic Press Center, providing hardware and software required to scan, proof, store, and transmit text and image files; color corrections and page layouts; and store, locate, and retrieve files; altogether processing some nine GB of information daily, sending it via T1 line to an off-site press imagesetter, producing 300,000 copies of the daily 40-page magazine. Scitex America also provided its PressPoint system, from which fans could print their hometown newspapers, including the Daily Telegraph and the Daily Mirror from the U.K., South Africa's the Star, Germany's Bild and Die Welt, and France's Liberation.

Also that summer, Scitex released a line of advanced digital front-end output devices called Brisque, providing unique integration and automation facilities of prepress production output operations and compatible with Mac, PC, and Unix computers.

In August, Scitex signed an agreement with Imation Corp., an imaging and information company spun off from 3M, to integrate with the Realist print engine developed by Iris, as a component in one of Imation's digital proofing systems.

Although Scitex underwent large-scale restructuring, laying off 20 percent of the company's largest division, the company still posted an overall net loss of $178.3 million in 1996 on revenues of $695 million. But by August 1997, Scitex was in the black again, recording its first positive income figure in four quarters, with net income of $157,000 in the second quarter on $167 million in revenues.

In April, Scitex and Xerox ended their joint marketing of the Spontane digital printing system. But, a month later, a separate agreement continued as Scitex and Xerox released the SX3000 Digital Front-End (DFE) for the DocuColor 70 color digital production system and the SX3000 DFE second-generation model for the DocuColor 40 system. Also in May, Scitex and Indigo integrated the Indigo E-Print digital printer into the Brisque DFE workflow.

Scitex also allied with British Telecom (BT) and MCI Corp. to develop and test advanced network-based applications for the graphic arts and printing industries, including a secure, high-capacity, managed-communications platform called The Digital Graphic Network (DGN), supporting a range of specialized applications for various stages of the graphic arts digital workflow, from image capture to printing. DGN also provided the graphic arts industry with a global "community-of-interest network," linking service providers for all stages in the production process, including corporate marketing, departments, designers, advertising agencies, picture libraries, digital trade shops, printers, and publishers and covered applications like remote file transfer, advertisement delivery, remote proofing, distributed printing, and high-resolution image access and transfer. DGN began in the U.K., France, Germany, and the U.S. and spread worldwide. The agreement came after BT and MCI agreed to merge, and provided one of the first network-based industry-specific applications in the world. In September, Scitex and Komori, one of the world's largest manufacturers of printing machines, agreed to jointly develop and market new technologies. The company continues to develop new technologies and set the standard for digital video and on-line video editing.